Has the End of the Angel Tax Era Finally Come?
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In order to provide hassle-free tax environment to the Start-ups, the finance ministry and the CBDT or Central Board for Direct Taxes has been taking action and now the latter has issued a consolidated circular highlighting all the changes that will take place in the face of Indian startups and the demonic angel tax.
According to the circular, the five primary changes that have taken place include- simplification of the process of assessment of start-ups, time limit for completion of pending assessments of start-ups, procedure for addition made u/s 56(2)(viib) in the past assessment, income-tax demand and constitution of start-up cell.
Steps Towards Change
Until a few years ago, to spell the word angel tax evokes disastrous imagery in the minds of startupreneurs. The word was akin to pronouncing doom for startups. However, the government, particularly, the Ministry of Finance has been a catalyst in easing this concern of start-ups, the interim budget and the union budget, significantly contributing to the same.
The circular by CBDT highlights the major changes that will change the angel tax is perceived by start-ups. According to the circular, the process of assessing start-ups will be simplified marginally. This has been evident in the circulars that were issued earlier. For instance, a month ago, one of the circulars stated that if a startup is registered with the DPIIT, then no enquiry will be conducted by the tax officer but if a start-up is not registered then it will have to undergo the procedures with due diligence.
The CBDT has directed that the enquiry to be done by the end of this month, i.e, September 30, 2019 and the “other cases of Start-ups were to be disposed off on priority, preferably by 31st October, 2019,” which means all the enquiries have to be wrapped absolutely by the end of the third last month of the year.
The circular has also highlighted that any outstanding demand for income tax will not be carried out against startups unless it is confirmed by ITAT or Income Tax Appellate Tribunal.
The CBDT has also directed that all grievances and requests for redressal will be routed online on a particular email address given in the circular and will be resolved by the end of this month.